On March 25, attorney Michael Avenatti was arrested in New York outside the office of one of Nike’s lawyers. Avenatti has been charged with four counts of extortion and conspiracy for threatening to reveal alleged evidence that Nike made improper payments to high school basketball players and their families. Despite most of the immediate backlash being negativity towards Avenatti, Nike may ultimately be hurt the most going forward.
The shoe and apparel powerhouse claims that Avenatti demanded that Nike pay $1.5 million to one of his clients and $15 million to $25 million for him and a partner to personally conduct an “investigation” of Nike. The lawsuit occurred almost instantly after Avenatti sent out a tweet from his personal twitter account, claiming that he was planning on disclosing a “major high school/college basketball scandal,” which involved individuals going up to the highest officials working for the company. Less than 15 minutes after the tweet was posted, Avenatti was arrested. Later that day, he was also charged with completely separate wire and bank fraud charges by federal prosecutors in Los Angeles, accusing him of defrauding a bank by using phony tax returns to obtain millions of dollars in loans.
Michael Avenatti gained notoriety last year for his representation of adult film star Stormy Daniels in her lawsuits against President Donald Trump. Now, he is back in the news again following this latest claim against him. Immediately after his arrest, Avenatti expressed assurance that he was innocent, stating that he was “highly confident” that he would be fully exonerated and justice will be done, based on his claim that he and his partners “made it clear that under no circumstances would we participate in anything that did not require full disclosure to investigators and the federal government.” However, in the days since, he has admitted that he is “nervous” and “scared” about the prospect of going to prison for the rest of his life.
In a series of tweets the day after he was arrested, Avenatti released the information that he had threatened in his original post. Among other statements, the lawyer claimed that Nike has not been cooperating with the NCAA, that high-ranking officials like Merl Code, Jr. were a part of the scandal, and he named star players that Nike illegally paid, including Deandre Ayton and Bol Bol. As “afraid and nervous” as Avenatti is about going to jail, he does not seem to be backing down from his original claims, choosing instead to provide specific details about Nike’s actions.
In the few days since Avenatti’s arrest, one thing has been pretty clear: people do not seem to care about his accusations nearly as much as he expected. He is producing some major allegations with some top-tier names attached, and yet there has been nowhere near the media-storm that one would expect. Nike’s stock took a very minor dip immediately after Avenatti’s initial tweet, but since then has been basically back to normal. It is hard to say exactly why there has not been the coverage that would be expected for such a hard-hitting story. One reason could be because a very similar scandal happened with fellow shoe-giant Adidas earlier this year, and people are just not as surprised anymore when this sort of thing happens. Whatever the reason, the type of anti-Avenatti/pro-Nike sentiments that have taken place in the days following the tweets are exactly what Nike hoped for in its extortion lawsuit against Avenatti. Nike has come out as the clear winner in the “Court of Public Opinion,” and has not been hampered nearly as bad as it probably feared earlier this week. In that, Nike can find solace.
However, that is where the good news for Nike seemingly stops. Despite not losing favor with the public, Nike’s own whistle-blowing will more than likely cause immense future problems for the company. By essentially alerting federal authorities of Avenatti’s accusations against it, Nike has made their alleged indiscretions very public. Whether Avenatti extorted Nike over the information or not, it will now be seemingly impossible for the company to escape a full investigation from the appropriate authorities over the allegations. Questions will be asked of all of these former corporate officials and players that were named in the tweets, and that could spell serious consequences, just like in the Adidas scandal. It seems unlikely that Avenatti was pulling all of this information out of ‘thin air,’ and therefore it will be very hard for Nike to escape a systematic investigation unscathed.
Adidas has not been completely derailed by the scandal, but it has nonetheless taken a hit, both in partnerships and in public opinion. With its latest actions, Nike has opened itself up to the same exact fate. After celebrating a win in the eyes of the public over the last few days, the shoe-powerhouse should now prepare itself for a daunting battle in the eyes of the law. Unlike maintaining its image and social well-being, this may be one battle that Nike simply cannot win.
Photo Credit: Peter Foley (European Pressphoto Agency); nike.com